Essar's stake in Kenya's fourth mobile operator up for sale

By Dennis Mbuvi | 08 August 12

India's Financial Chronicle has reported that Essar group has hired BNP Paribas to help it sell its 72 percent stake in Essar Telecommunications in Kenya, which operates as Yu (http://wrd.mydigitalfc.com/news/essar-quit-its-african-telecom-ops-yu-mobile-778) . This follows a similar move where the firm sold its stake in Warid Telecom in both Democratic Republic of Congo and Uganda.

Yu's office in Kenya has said it will issue a statement on the same later on Wednesday. Yu is Kenya's fourth mobile operator and began operations in November 2008. Econet then pledged to invest 500 million dollars in the company's operations.

In July 2012, Yu denied that the firm had been given 2 months by Essar group to find a buyer. In a statement which the firm later denied being an official position of the firm, Yu said that Essar remained committed to the country having invested over US $500 million into Yu's operations. (http://www.cio.co.ke/news/main-stories/yu-denies-winding-up-rumours) .

Essar says that India's strategy of low pricing had failed to attract more subscribers and a high volume of calls like it had in India. Yu has offered among the lowest call rates in the country. The firm started out by charging Ksh7.50 for all calls. At the time, Safaricom which had 80 percent customer base was charging Ksh8 for within network calls and ksh10 for calls to other networks.

Yu currently charges Ksh4 for calls of any length within the network between 6 A.M. and 6 P.M. and Ksh3 per minute thereafter for Yu to Yu calls. Calls to other networks are billed at Ksh3.

Communications Commission of Kenya (CCK) statistics for January to March 2012 show that Yu had 2,554,258 subscribers, up 14.5 percent from the previous quarter and 61.2 percent from January to March 2011. The firm had 8.7 percent market share against Orange at 10.6 percent Airtel at 15.3 percent and Safaricom at 65.3 percent.

Yu had 2,229,974 subscribers in December 2011 and 1,629,689 in September 2011.

CCK statistics show Kenya has a mobile penetration of 75 percent. The same statistics show that Yu had 8.7 percent share of voice traffic versus Orange at 0.8 percent . Airtel at 13.2 percent and Safaricom at 77.3 percent.

Kenyans make an average of 77.7 minutes of voice calls per month in the January to March 2012 period. India minutes of use are between 340 and 350 minutes spent on voice calls by each mobile user per month.

In the mobile data segment Yu has 10.01 percent market share compared with Orange at 9.52 percent, Airtel at 9.45 percent and Safaricom at 71.02 percent. Yu remains the only Kenyan mobile operator which has not paid the US $10 million required for a 3G license and therefore the only operator without a 3G network.

The firm however has a 10 percent stake of TEAMS Kenya 85 percent stake in The East African Marine System (TEAMS) and is also a part of a similar recently formed Public Private Partnership to establish a 4G-LTE network in Kenya.

Below is the statement from Yu's office on the same:

yuMobile finds the Kenyan market exciting and with a stable economy. We are bullish on the business environment and growth prospects, particularly as in Kenya, the telecom Industry continues to show robust growth as demonstrated last year, where the industry has grown by 15.8%. yuMobile has been the fastest growing operator, registering a growth of 61.2%, way ahead of industry growth.

yuMobile has invested more than Kes.40 Billion in Kenyan Telecom business. We intend to continue investing in the business to meet increasing demand for our services while expanding our network, as well as our commitment to investing in LTE (4G) in Kenya along with Government.

To meet these future investment needs, we are evaluating an opportunity to raise capital and BNP Paribas has been appointed for the purpose.

yuMobile is excited by consumer confidence and huge growth in subscriber base. yuMobile stands committed to the Kenyan market and consumers in providing best in class mobile services at most affordable rates.

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